Chapter 17 And 18 Key Terms

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Capitalism

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an economic system in which individuals and corporations, not the government, own the principal means of production and seek profits. Pure capitalism means the strict noninterference of the government in business affairs.

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mixed economy –

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an economic system in which the government is deeply involved in economic decisions through its role as regulator, consumer, subsidizer, taxer, employer and borrower. The United States

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multinational corporation

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a large business with vast holdings in many countries. Many of these companies are larger than most governments.

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Securities and Exchange Commission

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the federal agency created during the New Deal that regulates stock fraud.

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minimum wage

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the legal minimum hourly wage for large employers. It varies from state to state and between states and the federal government.

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labor unions

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organizations of workers intended to engage in collective bargaining.

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collective bargaining

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negotiations between representatives of labor unions and management to determine acceptable working conditions.

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unemployment rate

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the proportion of the labor force actively seeking work but unable to find it; it is measured by the Bureau of Labor Statistics.

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inflation

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the rise in prices for consumer goods. Inflation hurts some but actually benefits others. Groups such as those who live on fixed incomes are particularly hard hit while people whose salary increases are tied to the consumer price index but whose loan rates are fixed may enjoy increased buying power.

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Consumer Price Index (CPI)

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the key measure of inflation that related the rise in prices over time.

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laissez- faire

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the principle that government should not meddle in the economy.

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monetary policy

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the manipulation of the supply of money in private hands by which the government can control the economy.

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monetarism

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an economic theory holding that the supply of money is the key to a nation’s economic health. (too much cash and credit in circulation produces inflation.)

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Federal Reserve System

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the main instrument for making monetary policy in the US. It was created by Congress in 1913 to regulate the lending practices of banks and thus the money supply. The 7 members of its board of governors are appointed to 14 year terms by the President with the consent of the Senate.

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fiscal policy

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the policy that describes the impact of the federal budget. Taxes, spending and borrowing on the economy. Almost entirely controlled by Congress and the President, who are the budget-makers.

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Keynesian economic theory

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the theory emphasizing that government spending and deficits can help the economy weather its normal ups and downs. Proponents advocate using the power of government to stimulate the economy when it is lagging.

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supply-side economics

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an economic theory advanced by President Reagan holding that too much income goes to taxes and too little money is available for purchasing and that the solution is to cut taxes and return purchasing power to the consumers.

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protectionism

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economic policy of shielding an economy from imports.

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World Trade Organization (WTO)

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an international organization that regulates international trade.

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antitrust policy

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a policy designed to ensure competition and prevent monopoly, which is the control of a market by one company.

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Food and Drug Administration (FDA)

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the federal agency formed in 1913 and assigned to the task of approving all food products and drugs sold in the United States. All drugs, with the exception of tobacco, must have FDA authorization.

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National Labor Relations Act

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a 1935 law, also known as the Wagner Act, that guarantees workers the right of collective bargaining, sets down rules to protect unions and organizers, and created it to regulate labor-management relations.

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socialwelfare policies

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policies that provide benefits to individuals, either through entitlement or means testing.

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entitlement programs

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government benefits that certain qualified individuals are entitled to by law regardless of need.

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means-tested programs

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government programs available only to individuals below the poverty line.

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income distribution

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the shares of the national income earned by various groups.

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income

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the amount of funds collected between any two points in time.

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wealth

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the value of assets owned.

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poverty line

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a method used to allow the government to count the number of poor people. It considers what a family might spend for an “austere” standard of living.

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feminization of poverty

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the increasing concentration of poverty among women, especially unmarried women and their children.

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progressive tax

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a tax by which the government takes a greater share of the income of the rich than the poor. For example, when a rich family pays 50% of its income in taxes, a poor family pays 5%.

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proportional tax

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a tax by which the government takes the same share of income form everyone, rich and poor alike. For example, when a rich family and a poor family both pay 20%.

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regressive tax

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a tax in which the burden falls relatively more heavily upon low-income groups than upon wealthy taxpayers.

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Earned Income Tax Credit

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a “negative income tax” that provides income to very poor individuals in lieu of charging them federal income taxes.

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transfer payments

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benefits given by the government directly to individuals. They may be either cash transfers (Social security or retirement payments) or in-kind transfers (food stamps and low interest college loans

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Social Security Act of 1935

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created both the Social Security program and the national assistance program for poor children usually called AFDC.

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Personal Responsibility and Work Opportunity Reconciliation Act

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the official name of the welfare reform law of 1996 which gave welfare money to states, required people on welfare to find work within 2 years, and put a 5 year cap on lifetime welfare benefits.

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Temporary Assistance to Needy Families

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was once called Aid to Families with Dependent Children (AFDC). It is the new name for public assistance to needy families.

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Social Security Trust Fund

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the “bank account” into which Social Security contributions are “deposited” and used to pay out eligible recipients.